The Fed keeps interest rates unchanged and removes reference to inflation "progress" in a statement.

By Howard Schneider and Michael S. Derby

WASHINGTON (Reuters) - The Federal Reserve kept its benchmark interest rate unchanged in the range of 4,25% to 4,50% on Wednesday and gave little information about when further cuts in borrowing costs might occur in an economy where inflation remains above target, growth is strong, and the unemployment rate is low.

The U.S. central bank removed from its latest monetary policy statement the passage that said inflation had "progressed" toward the Fed's 2% inflation target, highlighting only that the pace of price increases "remains elevated."

Recent readings of key inflation indices remain about 0,50 percentage points or more above the Fed's target.

Federal Reserve officials say they widely believe that progress in reducing inflation will resume this year, but have kept interest rates unchanged while awaiting data to confirm this.

"Economic activity continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid," said the central bank's Federal Open Market Committee, which sets monetary policy, in a statement following the end of its latest two-day meeting.

"In considering the extent and timing of further adjustments to the benchmark interest rate range, the Committee will carefully assess incoming data, evolving prospects and the balance of risks," he said.

The unanimous decision to keep the overnight interest rate in the current range of 4,25% to 4,50%, along with the new statement, puts the Fed on hold while officials await more data on inflation and employment and more clarity on the impact of US President Donald Trump's policies.

The Trump administration has already taken steps to deport some undocumented immigrants and freeze federal spending, and may expand its reach to impose new import tariffs on key trading partners such as Mexico and Canada as early as this weekend.

Federal Reserve Chair Jerome Powell will hold a press conference to discuss this week's monetary policy meeting.

The decision to keep the monetary policy rate stable was widely anticipated after three consecutive cuts to the benchmark rate in 2024, which reduced the Fed's reference rate by 1 percentage point.

There is a debate within the central bank about how much further interest rates need to fall, with policymakers predicting perhaps two 0,25 percentage point cuts over the course of the year.

Officials say they want to see if inflation continues to fall to the Fed's target in the coming months before easing monetary policy again, while also expressing uncertainty about the effect Trump's plans will have on price pressures, the labor market, and economic growth.